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Rating Action:

Moody's assigns Ba3 to CSC Holdings, LLC's new guaranteed notes and B3 to new unsecured notes in $2 billion refinancing; transaction is credit neutral

29 Apr 2021

New York, April 29, 2021 -- Moody's Investors Service, ("Moody's") assigned a Ba3 rating to CSC Holdings, LLC's (CSC or the Company) new $1.5 billion senior guaranteed notes (maturing 2031) and a B3 rating to CSC's new $500 million senior unsecured notes due 2031 (unguaranteed), collectively the "Refinancing Transaction". The Company's B1 Corporate Family Rating (CFR), B1-PD Probability of Default Rating (PDR), all existing instrument ratings and the stable outlook are unaffected by the proposed transaction.

Moody's views the Refinancing Transaction as credit neutral, with no material change in pro forma leverage at close. We expect CSC to use the net proceeds, and any incremental upsizing of the notes, to repay outstanding debt, including obligations drawn under the revolving credit facility. Any incremental leverage (net of repayment) will not materially change the credit profile or the proportional mix of secured and unsecured debt, or the resultant creditor claim priorities in the capital structure. Moody's expects the terms and conditions of the newly issued notes will be materially the same as existing notes. However, we expect borrowing costs under the new notes to be lower.

Assignments:

..Issuer: CSC Holdings, LLC

....Senior Unsecured Regular Bond/Debenture, Assigned B3 (LGD5)

....Gtd Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD3)

Adjustment:

.. LGD Senior Unsecured Regular Bond/Debenture, Adjusted to LGD5 from LGD6

RATINGS RATIONALE

CSC Holdings, LLC's (CSC Holdings, B1 stable) credit profile is supported by its large size (near $10 billion in revenue) and somewhat diversified footprint, with good market position and favorable market dynamics, specifically strong broadband demand fueling growth and profitability. The business model is very predictable, with a monthly recurring base of revenue from a large base of residential and commercial customers. Strength is reflected in industry leading operating metrics including investment-grade like EBITDA per homes passed (EPH) and the Triple Play Equivalent (TPE) ratio. The Company has a high-speed network, superior to in-market peers across most of its footprint except where fiber competitors overlap like Verizon FIOS in the optimum geography. Residential broadband's strong revenue growth and profitability supports consolidated EBITDA margins in the mid 40% range and is a significant contributor to the Company's free cash flow (near $1.9 billion, Moody's adjusted at year end 2020). We expect this strength to continue, supported by network investments and very good liquidity. The rating is constrained by a less than conservative financial policy that tolerates high leverage (near 5.8x, Moody's adjusted as of 31 December 2020), due to a financial policy that currently prioritizes dividends to its parent over debt repayment, which its parent uses to fund M&A and or dividends (sized near free cash flow, before dividends). Additionally, CSC Holdings' video and voice businesses are declining, under secular pressure and the Company is investing at a loss to ramp its wireless MVNO services to defend its broadband market position and participate in the 5G growth opportunity.

The SGL-1 liquidity rating reflects very good liquidity supported by strong operating cash flow, a large revolving credit facility, substantial covenant headroom, and alternative liquidity. The company also benefits from a favorable maturity profile with limited maturities over the next 2 years.

Moody's currently rates CSC's senior secured bank debt facilities Ba3 (LGD3), one notch above the B1 CFR. The secured debt has a stock pledge and is guaranteed by the operating subsidiaries of the Company. Bank lenders benefit from junior capital provided by the senior unsecured bonds at CSC (which have no guarantee). We rate the senior unsecured guaranteed notes at CSC Ba3 (LGD3), pari- pasu with the senior secured creditors with the benefit of the same guarantee from the restricted subsidiaries (as the credit facility creditors) and our view that the stock pledge for secured lenders provides no additional lift/benefit as the equity collateral would likely be worthless in a default scenario. Moody's rates CSC's senior unsecured (non-guaranteed) notes B3 (LGD5), two notches below the B1 CFR given the subordination in the Company's capital structure. The instrument ratings reflect the probability of default of the Company, as reflected in the B1-PD Probability of Default Rating, an average expected family recovery rate of 50% at default given the mix of secured and unsecured debt in the capital structure, and the particular instruments' ranking in the capital structure.

Moody's maintains a Ba3 senior secured rating and a B3 senior unsecured rating on certain debt that was originally issued by Neptune Finco Corp., an acquisition vehicle used by Altice USA (CSC's ultimate parent company, unrated) to acquire the operating subsidiary D/B/A Cablevision. In 2015, Neptune was merged with and into CSC, which effectively assumed all Neptune obligations; however, our internal databases continue to reflect Neptune as a debt issuer.

The stable outlook reflects our expectation that debt, revenue, and EBITDA will approach approximately $25-26 billion, $10.5-$11 billion, and up to $5 billion, respectively, over the next 12-18 months, with EBITDA margins in the mid 40% range and rising. We expect free cash flows (before dividends) to average at least $1.7-$1.8 billion, after capital expenditures of up to $1.4 billion (mid-teens percent of revenue). We expect the dividend payouts to be sized equal to or greater than free cash flows (before dividends). We project leverage to be in the low to mid 5x range, and FCF/debt (before dividends) to be in the high single digit percent range.

Note: all figures are Moody's adjusted over the next 12-18 months unless otherwise noted.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's could consider an upgrade if:

• Leverage (Moody's adjusted Debt/EBITDA) is sustained below 5.0x, and

• Free cash flow to debt (Moody's adjusted, before dividends) is sustained above 5.0%

An upgrade would also be considered on maintaining very good liquidity, a stable subscriber base, and or a more conservative financial policy.

Moody's could consider a downgrade if:

• Leverage (Moody's adjusted Debt/EBITDA) is sustained above 6.25x, or

• Free cash flow to debt (Moody's adjusted, before dividends) is sustained below 3%

A downgrade could also be considered if the scale of the company declined, liquidity deteriorated, there was a material and unfavorable change in operating performance, or the company adopted a more aggressive financial policy.

The principal methodology used in these ratings was Pay TV published in December 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1134554. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Long Island City, New York, CSC Holdings, LLC passes nearly 9 million homes in 21 states, serving approximately 5 million residential and business customers and about 9.5 million subscribers. The Company is wholly owned by Altice USA, a public company majority owned and controlled by Patrick Drahi. Revenue for 2020 was approximately $9.9 billion.

In 2020 Altice sold 49.99% of Lightpath Group (Cablevision Lightpath LLC and its subsidiaries), its fiber enterprise business, to Morgan Stanley Infrastructure Partners (MSIP) for an enterprise value of $3.2 billion. Altice retains a 50.01% interest in Lightpath Group, maintains control of the company, and fully consolidates its financial results.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jason Cuomo
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Lenny J. Ajzenman
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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